The Senate, at its weekend plenary session, approved President Bola Ahmed Tinubu’s request for securitization of the outstanding debit balance of N7.3 trillion of the Ways and Means Advance in the Consolidated Revenue Fund (CRF) of the Federal Government.
President Bola Ahmed Tinubu has formally informed the Senate of his intention to securitize the N7.3 trillion outstanding domestic debt balance.
Tinubu, in the letter read on the floor of the Red Chamber by the President of the Senate, Godswill Akpabio, disclosed that his action was in line with the provisions of the Central Bank of Nigeria Act 2007, “which stipulates that the apex bank may grant temporary advances to the Federal Government in respect of a temporary deficiency of budget revenue provided such overdrafts do not surpass 5% of the government’s revenue from the previous year.”
President Tinubu’s formal request was considered by the Senate Committee on Supply and given speedy approval at the plenary.
Ways and Means is a loan facility through which the CBN finances the government’s budget shortfalls.
Checks revealed that the terms of the securitization of the Ways & Means Advance as gazetted by the Debt Management Office (DMO) involve the issuance of debt securities with a 40-year tenor by the FG to the CBN, with an interest rate of 5% and a 3-year moratorium on principal repayments.
Tinubu, in his letter, listed the gains of the securitization of Ways and Means to include, amongst others, “Reduction of debt service costs as the interest rate for the securitized Ways and Means advance is lowered to 9% per annum compared to MBR, which is 0.3%.”
The letter titled “Securitization of the debit balance of ways and means in the consolidated revenue fund of the Federal Government of Nigeria” reads in part:
“I would like to draw the attention of the Senate to the provisions of Section 38 of the subsisting CBN Act 2007, which stipulates that the apex bank may grant temporary advances to the Federal Government in respect of a temporary deficiency of budget revenue, provided such overdrafts do not surpass 5% of the government’s revenue from the previous year.
“The Senate is invited to note that, from available information by the CBN, the Consolidated Revenue Fund (CRF) account of the Federal Government of Nigeria (FGN) stood at N7.3 trillion as of December 11, 2023, which is due to domestic debt servicing, principal, and interest.
“While the Federal Government is considering various measures to forestall the use of Ways and Means advances for domestic debt servicing, it has become highly imperative to securitize the outstanding Ways and Means advances of the Federal Government of Nigeria before the end of the year 2023.
“The securitization of the ways and means will lead to the realisation of the following benefits, among others:
- Reduction of debt service costs as the interest rate for the securitized Ways and Means advance is lowered to 9% per annum compared to MBR, which is 0.3%.
- The savings arising from the much lower interest rate will help reduce the deficit in the budget.
- Improvement in debt transparency as securitized ways and means advances are included in the public debt statistics.
“In view of the foregoing, the Senate is invited to kindly consider and approve the securitization of the outstanding debit balance of N7.3 trillion as of December 2023.”
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